Governments Around The World Work To Bail-Out Banks

Daily Forex Fundamentals | Written by Finotec Group | Oct 08 08 08:40 GMT |

Investors should buy the dollar against the yen as markets begin to recover their risk appetite as governments in the U.S. and Europe work to restore confidence in the global financial system, according to UBS AG. The Federal Reserve said yesterday it will create a special fund to buy U.S. commercial paper, seeking to unblock that market, while Chairman Ben S. Bernanke signaled policy makers are ready to lower interest rates. On the other hand European Union leaders proposed to raise the minimum guarantee on households' bank deposits to 50,000 euros ($68,000) from 20,000 euros. 'The market has reasons to respond positively to efforts from officials in Europe and the U.S.,' wrote analysts led by Benedikt Germanier, a Stamford, Connecticut-based currency strategist at UBS AG, in a research note yesterday. 'Efforts may soon reach a critical level in our view, helping investors' sentiment.' The USD/JPY is currently trading at 100.45 as of 7:32am, GMT.

The sterling rose against the dollar and euro after the U.K. said it will make about 50 billion pounds available to the country's banks. The government will buy preference shares while the Bank of England will make at least 200 billion pounds available for banks to borrow under the so-called special liquidity plan, the Treasury said in a statement today. 'The pound is getting a strong lift on the back of the Treasury announcement,' said Neil Mellor, a currency strategist in London at Bank of New York Mellon Corp. 'the size of the package was a big positive and there is relief that something is being done.' The GBP/USD is currently trading at $1.7535 as of 7:51am, GMT.

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